Earnings before interest and taxes rose to $1.05 billion
from $1.01 billion a year earlier, Zurich-based ABB said today.
Analysts predicted $1.04 billion. Orders increased 2 percent in
local currencies, with the company highlighting improved
profitability in some businesses. The stock fell as much as 4.2
percent after ABB said Chinese orders declined.

The Swiss manufacturer of factory robots and transformers
is working through a near $30 billion backlog of orders and
riding out a slowdown in purchases of big-ticket items like
power grids. Chief Executive Officer Joe Hogan has also forged
ahead with $10 billion in acquisitions since the start of 2010,
outspending competitors Siemens AG and Schneider Electric SA.

“Price pressure and unfavorable mix present a headwind,”
said Mats Liss, an analyst at Swedbank. “It is expected to
disappear gradually. Sales are expected to grow within its early
cycle business; the mid- to later cycle will be supported by the
order backlog.”

Sales rose 6 percent to $8.9 billion, also in line with
estimates. Hogan warned investors in February that price
pressure and a change in order patterns would hurt margins in
the first quarter. To counter that trend, ABB is implementing $1
billion of cost savings in 2012.

China Slowdown

ABB shares fell as much as 4.2 percent after the company
said orders declined in Asia, mainly in China, citing “weaker
demand in key end markets, such as construction and
transportation,” and an unfavorable comparison after booking
several large power orders worth more than $300 million a year
earlier.

More than half of ABB’s profitability decline from the
first quarter of 2011 was attributable to the challenging
environment in China, the company said.

“The Chinese transportation market may pick up from the
second half, as projects which were delayed by a change in
government are re-started. The construction market is more
worrying,” Zuercher Kantonalbank analyst Richard Frei said by
phone.

“ABB is still on target to meet its operational Ebitda
targets. The business goals have not changed, but they might
reach the lower end of those targets,” Frei said.

Momentum Building

“We saw improved profitability in several businesses
compared to the end of last year, and we intend to build on that
momentum to tap the many opportunities we see for profitable
growth over the rest of the year,” Hogan said in the release.

There are clearer signs of recovery in North American
markets, though budgetary restraints are hampering demand in
nations like Italy and Spain, ABB said. Base orders, valued at
below $15 million, increased 4 percent. By contrast, large
orders decreased 11 percent, ABB said.

ABB’s view mirrors that of Schneider Electric SA, which
earlier this month said the European debt crisis is weighing on
sales. Schneider reported a better-than-expected 9.4 percent
gain in first-quarter revenue and predicted an improvement in
western European markets later this year. Siemens AG, Europe’s
largest engineering company, lowered its full-year guidance
today after booking charges on offshore wind-power projects.

American-born Hogan, 54, joined the company in 2008 from
General Electric Co. with a track record in mergers and
acquisitions. Hogan has said that while the company must digest
its recent purchases, the company still has capacity for more
deals.

Software, Low Voltage

The bulk of Hogan’s acquisition spending has centered on
the U.S. and markets such as software, helping the company
offset pricing pressure in power transmission and distribution
gear. ABB announced in January plans to acquire low-voltage
equipment maker Thomas & Betts Corp. for about $3.7 billion,
giving it a larger U.S. customer-base and new revenue from low-voltage products.

ABB’s cash flow in the quarter was weaker than expected,
Swedbank’s Liss said in a note today. The company reported a
decline in its net cash position to $1.4 billion from $1.8
billion.